POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

College of Accountancy and Finance

ACCO 20053: Intermediate Accounting 1
Midterm Departmental Examination

NAME: __________________________________ SECTION: ____________ DATE: August 25,

2019
General Instructions: Faith is the confidence that what we hope for will happen; it gives us assurance about
things we cannot see. Have faith and always bear in your mind that you can answer everything to the best that
you can. You must shade the scannable answer sheet properly. Always observe HONESTY during the
examination. GODBLESS!

THEORIES (1 pt. each)

1. Under existing rule, cash is considered as
A. Fixed asset B. Financial asset C. Depreciable asset D. Non-monetary asset

2. Statement 1: In accordance with PAS 1 par. 66D, an entity shall classify an asset as current when the
asset is cash or a cash equivalent unless the asset is restricted from being exchanged or used to settle a
liability for at least twelve months after the reporting period.
Statement 2: Cash equivalents are investments with original maturities of six months or less.
A. Only statement 1 is correct C. Both statements are correct
B. Only statement 2 is correct D. Both statements are incorrect

3. Which of the following is not considered cash for financial reporting purposes?
A. Petty cash funds and change funds C. Money orders, certified checks, and personal
checks
B. Coin, currency, and available funds D. Postdated checks and I.O.U.'s

4. In which circumstances that a bank overdraft is include as component of cash and cash equivalent?
A. when it is repayable on demand
B. when it is repayable on demand or form an integral part of an entity’s cash management
C. when it is repayable on demand and form an integral part in the entity’s cash financial statement
D. when it is repayable on demand and form an integral part of an entity’s cash management

5. Check drawn before the balance sheet date but held for later delivery
A. should be treated as trade receivable C. should be regarded as cash
B. should be restored back to cash D. should be treated as outstanding checks

6. Cash denominated in foreign currency (e.g. USD, Euro) shall be translated to Philippine peso using
A. closing rate B. passing rate C. average rate D. historical rate

7. What happens when an entity records the payment of payable made in the subsequent period as if it
were made in the current period?
A. Kiting B. Fishing C. Window dressing D. Lapping

8. Which of the following is an incorrect application of the imprest system of cash control?
A. Cash receipts must be deposited on a regular basis.
B. Cash disbursements must be made through check, regardless of the amount.
C. Material amount of cash disbursements be made in the form of checks.
D. Insignificant cash disbursements must be made out of the petty cash fund.

9. IOS found in the petty cash drawer at the time of replenishment should be reported as part of
A. Receivables B. Inventories C. Trading securities D. Cash and cash
equivalents

10. A debit balance (i.e. shortage) in the “Cash short or over” account at the end of the period that can be
attributed to the fault of the petty cashier is treated as
A. Miscellaneous expense C. Receivable from employee
B. Payable to employee D. Miscellaneous income

11. Bank statements provide information about all of the following except
A. NSF check C. Checks cleared during the period
B. Bank service charges for the period D. Errors unintentionally committed by the
depositor

1st Semester A.Y. 2019-2020 Intermediate Accounting 1: Midterm Examination 1-NAB

12. Which will not require an adjusting entry in the depositor’s books?
A. Bank service charge
B. NSF check from customer
C. Deposit of another company is credited to the account of the depositor
D. Check for payment amounting to P154 is recorded by the depositor as P145.
13. (Modified True or False) Company’s certified checks should be excluded from the total outstanding
checks since these checks were already charged to the depositor’s account by the bank.
A. True B. Unreleased checks C. Postdated checks D. NSF Checks

14. Statement 1: Savings accounts are usually classified as cash on the balance sheet.
Statement 2: Certificates of deposit are usually classified as cash on the balance sheet.
Statement 3: Bank overdrafts are always offset against the cash account in the balance sheet.
Statement 4: Short-term, highly liquid investments may be included with cash on the balance sheet.
A. Only one statement is correct D. All statements are correct.
B. Only two statements are correct. E. All statements are incorrect.
C. Only three statements are correct.

15. Balance per book is more than correct balance. Assuming no error was committed, there must be
A. Deposit in transit C. Bank service charge yet recorded by the company
B. Outstanding checks D. Deposit credited by the bank but not yet
recorded

16. Statement 1: Trade receivables are classified as current assets if they are not to be collected within
one year or within the normal operating cycle, which ever is shorter.
Statement 2: Non-trade receivables are classified as current assts if they are to be collected within one
year or within the normal operating cycle, which ever is longer.
A. Both statements are true C. Statement 1 is true while statement 2 is false
B. Both statements are false D. Statement 1 is false while statement 2 is true

17. Which is an example of trade receivables?

A. Claims in litigation B. Loans to employees C. Due from customers D. Receivables
from subsidiaries

18. A credit balance in accounts receivable resulting from overpayments , advanced payments and sales
returns should be classified as a
A. current liability B. long term liability C. contra asset D. note disclosure

19. Assuming that the ideal measure of short-term receivables in the balance sheet is the discounted value
of the cash to be received in the future, failure to follow this practice usually does not make the balance
sheet misleading because
A. most short-term receivables are not interest-bearing.
B. the allowance for uncollectible accounts includes a discount element.
C. the amount of the discount is not material.
D. most receivables can be sold to a bank or factor.

20. On the basis of substance over form, the interest on a non-interest bearing note is equal to
A. zero C. the excess of present value over cash price
B. the excess of face value over present value D. the excess of the market value over the
present value

21. At the beginning of 2019, Finney Company received a three-year zero-interest-bearing P1,000 trade
note. The market rate for equivalent notes was 8% at that time. Finney reported this note as a P1,000 trade
note receivable on its 2019 year-end statement of financial position and P1,000 as sales revenue for 2019.
What effect did this accounting for the note have on Finney's net earnings for 2019, 2020, 2021, and its
retained earnings at the end of 2021, respectively?
A. Overstate, overstate, understate, zero C. Overstate, overstate, overstate, overstate
B. Overstate, understate, understate, understate D. None of these

22. When a notes receivable is dishonored, it is debited to

A. Accounts receivable at face value C. Accounts receivable at face value plus interest &
charges
B. Dishonored note receivable at face value D. Dishonored notes receivable at face value plus
interest

23. Under the allowance method, the entry to recognize bad debts expense
A. Increases net income C. Has no effect to current assets
B. Has no effect to net income D. Decreases current assets

1st Semester A.Y. 2019-2020 Intermediate Accounting 1: Midterm Examination 2-NAB

24. Uncollectible accounts expense
A. represents the loss in accounts receivable that eventually turn out to be uncollectible.
B. is the amount an entity must pay whenever a customer fails to pay his or her account.
C. should not occur if a company properly investigates customers based on credit history.
D. is the amount an entity must pay to a collection agent to recover amounts on overdue accounts.

25. A financing arrangement whereby one party formally transfers its rights to accounts receivable to
another party in consideration for a loan.
A. Pledge B. Assignment C. Factoring D. Discounting

26. The amount of accounts receivable is included in total receivables with appropriate disclosures when
A. Pledge (Yes); Assigned (Yes); Factored (Yes) C. Pledge (Yes); Assigned (No); Factored (No)
B. Pledge (Yes); Assigned (Yes); Factored (No) D. Pledge (No); Assigned (No); Factored (No)

27. AAA Company factored its receivables without recourse with BBB Bank. AAA received cash as a result
of this transaction which is best described a
A. Loan from BBB collateralized by AAA’s accounts receivables
B. Loan from BBB to be repaid by the proceeds from AAA’s accounts receivable
C. Sale of AAA’s accounts receivable to BBB, with the risk of uncollectible accounts retained by
AAA
D. Sale of AAA’s accounts receivable to BBB, with the risk of uncollectible accounts transferred to
BBB.

28. Note receivable discounted with recourse should be

I. Included in total receivables with recognition of an outstanding liability.
II. Excluded from total receivables with disclosure of a contingent liability.
A. Only I is allowed B. Only II is allowed C. Both are allowed D. Both are not allowed

29. A loan receivable shall be measured subsequently at

A. Cost C. Amortized cost using the straight-line
method
B. Fair value D. Amortized cost using the effective interest method

30. Statement 1: Trade discounts are used to avoid frequent changes in catalogs and to alter prices for
different quantities purchased.
Statement 2: Companies record and report long-term notes receivable at the present value of the cash
they expect to collect.
Statement 3: When the stated rate of interest exceeds the effective rate, the present value of the note
receivable will be less than its face value.
Statement 4: When buying receivables with recourse, the purchaser assumes the risk of collectibility
and absorbs any credit loss.
Statement 5: For receivables sold with recourse, the seller guarantees payment to the purchaser if the
debtor fails to pay.
A. Only one statement is correct D. All statements are correct.
B. Only two statements are correct. E. All statements are incorrect.
C. Only three statements are correct.

PROBLEMS (2pts. each)

31. Kikiam Company has the following items at year-end: Cash in bank- P30,000; Petty cash- P500;
Treasury bills with maturity of 2 months from date of acquisition- P8,200; Postdated checks- P 2,100.
Kikiam should report cash and cash equivalents of
A. P30,000 B. P30,500 C. P38,700 D. P40,800

32. Fishball, Inc.’s checkbook balance on December 31, 2019 was P21,200. In addition, Fishball held the
following items in its safe on December 31.
v A check for P450 from Ketchup, Inc. received December 30, 2019, which was not included in the
checkbook balance.
v An NSF check from Toyo Company in the amount of P900 that had been deposited at the bank, but
was returned for lack of sufficient funds on December 29. The check was to be redeposited on
January 3, 2020. The original deposit has been included in the December 31 checkbook balance.
v Coin and currency on hand amounted to P1,450.
The proper amount to be reported on Fishball 's balance sheet for cash at December 31, 2019 is
A. P21,300 B. P20,400 C. P22,200 D. P21,750

33. Cheesestick Company had the following account balances at December 31, 2019:
Cash in Metrobank P1,875,000

1st Semester A.Y. 2019-2020 Intermediate Accounting 1: Midterm Examination 3-NAB

 Cash in BPI 200,000
Cash on hand (includes a customer’s check for P15,000 dated January 125,000
5, 2020)
Cash restricted for acquisition of machinery (expected to be disbursed 1,600,000
in 2020)
Cash in Metrobank include P300,000 of compensating balance. The compensating balance is legally
restricted as to withdrawal by Cheesestick. In the current asset section of Cheesestick’ December 31,
2019 statement of financial position, total cash should be reported at
A. P2,185,000 B. P1,885,000 C. P3,785,000 D. P3,485,000

34. Menudo Company provided the following information with respect to its cash and cash equivalents on
Dec. 31, 2019: Checking account at UB - P(100,000); Checking account at BDO- P 3,500,000; Treasury
saving bonds at LBP- P1,000,000; Payroll account- P500,000; Sales tax account- P400,000; Foreign bank
account- restricted (in equivalent pesos)- P 2,000,000; Employees postdated checks- P300,000; IOU from
president’s brother- P750,000; Credit memo from a vendor for a purchase return- P80,000; Traveler’s
check- P300,000; NSF check- P150,000; Petty cash fund-P50,000; Money order- P200,000. What amount
should be reported as unrestricted cash on the balance sheet?
A. P4,850,000 B. P4,650,000 C. P4,950,000 D. P6,950,000

35. The cash account of the Siopao Corporation as of December 31, 2019 consists of the following:
P
On deposit in current account with BDO Bank
900,000
Cash collection not yet deposited to the bank 350,000
A customer’s check returned by the bank for insufficient fund 150,000
A check drawn by the Vice-President of the Corporation dated January 15,
70,000
2020
A check drawn by a supplier dated December 28, 2019 for goods returned by 60,000
the Corporation
A check dated May 31, 2019 drawn by the Corporation against the BPI Bank
in payment of customs duties. Since the importation did not materialize, the 410,000
check was returned by the customs broker. This check was an outstanding
check in the reconciliation of the BPI Bank account
Petty Cash fund of which P10,000 is in currency; P7,200 in form of
employees’ I.O.U.; and P2,800 is supported by approved petty cash vouchers 20,000
for expenses all dated prior to closing of the books on December 31, 2019
P1,950,00
Total
0
Less: Overdraft with BPI Bank secured by a Chattel mortgage on the 300,000
inventories
P1,660,00
Balance per ledger
0
At what amount will the account “Cash” appear on the December 31, 2019 balance sheet?
A. P 1,315,000 B. P 1,430,000 C. P 1,425,000 D.
P1,495,000

36. A P100 petty cash fund contains P91 in petty cash receipts, P4.75 in currency and coins. The journal
entry to record the replenishment of the found would include
A. credit Petty cash for P95.75 C. debit Cash short or over for P4.25
B. credit Cash for P90 D. credit Cash short or over for P4.25

37. The petty cash box, upon investigation, showed the following items: bills- P450, coins- P50; vouchers
for taxi fare- P95, voucher for supplies- P155; an envelope containing contributions of employees for the
Christmas party, P200. How much was the amount of petty cash fund to be reported?
A. P500 B. P700 C. P750 D. P950

Data for item nos. 38 and 39

The following are data of Turon Inc.:
v The petty cash fund was established on May 2, 2019, in the amount of P10,000.
v The expenditures from the fund by the custodian as of May 31, 2019, were evidenced by approved
petty cash vouchers for the following: various office supplies- P3,920; IOUs from employees-
P1,200; shipping charges- P2,298; miscellaneous expenses- P1,526.
v On May 31, 2014, the petty cash fund was replenished and increased to P12,000; currency and
coins in the fund at that time totaled P756.
38. What us the amount of the petty cash shortage?
A. P11,244 B. P2,300 C. P300 D. P0

1st Semester A.Y. 2019-2020 Intermediate Accounting 1: Midterm Examination 4-NAB

39. The journal entry to record the replenishment of and increase in petty cash fund includes a
credit to
A. Cash in bank of P11,244 C. Petty cash fund of P10,944
B. Cash in bank of P10,944 D. Petty cash fund of P11,244

40. The cash account shows a balance of P45,000 before reconciliation. The bank statement does not
include a deposit of P2,300 made on the last day of the month. The bank statement shows a collection by
the bank of P940 and a customer's check for P320 was returned because it was NSF. A customer's check
for P450 was recorded on the books as P540, and a check written for P79 was recorded as P97. The
correct balance in the cash account was
A. P45,512 B. P45,548 C. P45,728 D. P47,848

41. Burger, Inc. had the following bank reconciliation at March 31, 2019:
Balance per bank statement, 3/31/19 P37,200
Add: Deposit in transit 10,300
47,500
Less: Outstanding checks 12,600
Balance per books, 3/31/19 P34,900
Data per bank for the month of April 2019 follow:
Deposits P46,700
Disbursements 49,700
All reconciling items at March 31, 2019 cleared the bank in April. Outstanding checks at April 30, 2019
totaled P6,000. There were no deposits in transit at April 30, 2019. What is the cash balance per books
at April 30, 2019?
A. P28,200 B. P31,900 C. P34,200 D. P38,500

Data for item nos. 42 and 43

The books of Spaghetti Company disclosed a cash balance of P691,720 on June 30. The bank statement
as of June 30 showed a balance of P556,800. Additional information that might be useful in reconciling the
two balances follows:
v Check No. 128 for P13,000 was erroneously recorded in the check register as P30,000.
v A customer’s note dated March 31 was discounted on April 12. The note was dishonored on June
29 (maturity date). The bank charged Spaghetti’s account for P142,650, which includes a protest
fee of P420.
v The deposit of June 24 was recorded on the books as P28,950 but it was actually a deposit of
P29,850.
v Outstanding checks totaled P98,850 as of June 30.
v There were bank service charges for June of P2,100 not yet recorded on the books.
v Spaghetti’s account had been charged on June 26 for a customer’s NSF check for P12,960.
v Spaghetti properly deposited P6,000 on June 30 that was not recorded by the bank.
v Receipts of June 30 for P134,250 were recorded by the bank on July 2.
v A bank memo stated that a customer’s note for P45,000 and interest of P1,650 had been collected
on June 27 and the bank charged a P360 collection fee.
42. How much is the correct cash balance at June 30?
A. P564,200 B. P591,720 C. P598,200 D. P596,400

43. How much is the net adjustment to the cash account?

A. P41,400 credit B. P41,400 debit C. P93,520 debit D. P93,520 credit

44. Pancit Company keeps all its cash in checking account. An examination of the company’s accounting
records and bank statement for the month ended December 31, 2019 revealed the following information:
Cash balance per bank statement – P846,900; Cash balance per ledger – P852,400. A deposit of P95,000
placed in the bank’s night depository on December 29, 2016 does not appear on the bank statement. The
bank statement shows that on December 26, 2019, the bank collected a note for Pancit and credited the
proceeds of P93,500 to the company’s account. The proceeds included P3,500 interest, all of which Pancit
earned during the current accounting period. Pancit has not yet recorded the collection. Checks
outstanding on December 31, 2016 were: No. 032752 – P15,000; No. 032758 – P4,800; No. 032767 –
P7,200. Pancit discovered that check No. 032759 written in December 2016 for P18,300 in payment of an
account had been recorded in the company’s records as P13,800. Included with the December 31, 2019
bank statement was an NSF check for P25,000 that Pancit had received from Pitt Company on account on
December 20, 2019. Pancit has not yet recorded the returned check. The bank statement shows a P1,500
service charge for December. The journal entry to adjust the cash balance as of December 31, 2019
includes a
A. debit to cash of P93,500. C. credit to cash of P31,000.
B. net credit to cash of P62,500. D. net debit to cash of P62,500.

1st Semester A.Y. 2019-2020 Intermediate Accounting 1: Midterm Examination 5-NAB

45. At the end of the month, the bank statement of Kwek-Kwek Company showed a balance of P102,000,
service charges of P6,000, a customer’s no-sufficient fund check of P20,000 and the proceeds of note
collected by the bank for Kwek-Kwek Company. The note had a face value of P15,000. Kwek-Kwek
Company reported a balance of P128,000 in its cash account at the end of the month. At this time, there
were P28,300 deposits in transit and P12,000 of outstanding checks. How much is the interest on the
note collected by the bank?
A. P13,000 B. P8,700 C. P3,000 D. P1,300

Data for item nos. 46 and 47

Palabok Company’s check register shows the following entries for the month of December:
Date Description Checks Deposits Balance
12/01/2019 Beginning balance P89,300
12/05/2019 Deposit P65,000 154,300
12/07/2019 Check # 14344 P32,500 121,800
12/11/2019 Check # 14345 14,000 107,800
12/26/2019 Deposit 49,000 156,800
12/29/2019 Check # 14346 8,600 148,200
Palabok’s bank reconciliation for November revealed one outstanding check (No. 14343) for P12,000
(written on November 28), and one deposit in transit for P5,550 (made on November 29).
Date Description Checks Deposits Balance
12/01/2019 Beginning balance P95,750
12/01/2019 Deposit P5,550 101,300
12/04/2019 Check No. 14344 P32,500 68,800
12/05/2019 Deposit 56,000 124,800
12/14/2019 Check No. 14345 14,000 110,800
12/15/2019 Loan proceeds 500,000 610,800
12/20/2019 NSF check 7,600 603,200
12/29/2019 Service charge 1,000 602,200
12/31/2019 Interest 3,600 605,800
46. How much is the adjusted cash balance on November 30, 2019?
A. P89,300 B. P95,750 C. P101,300 D. P102,200

47. How much is the adjusted cash balance on December 31, 2019?
A. P597,200 B. 634,200 C. P663,800 D. P748,200

48. In preparing its bank reconciliation for the month of April 2019, Ensaymada, Inc. has available the ff.
information.
Balance per bank statement, 4/30/19 P39,140
NSF check returned with 4/30/19 bank statement 450
Deposits in transit, 4/30/19 5,000
Outstanding checks, 4/30/19 5,200
Bank service charges for April 20
What should be the correct balance of cash at April 30, 2019?
A. P39,370 B. P38,940 C. P38,490 D. P38,470

49. Below are items listed in Shanghai Corp’s accounting records on May 2019: Receivables from
customers (net of P10,000 customer’s with credit balance), P40,000, Loans to employees- P14,000;
Advances to affiliates- P35,000; Accrued interest and dividends- P1,450; Deposits to guarantee
performance- P2,000; Claims for losses and damages- P2,500; Claims for tax refunds or rebates- P6,200;
Claims against common carriers for damaged goods- P1,400; Supplier’s account with debit balance- P800.
Considering that all of the non-trade receivables are collectible within 12 months, how much is the
current receivable to be presented on May 31, 2019 balance sheet?
A. P113,350 B. P111,950 C. P111,350 D. P78,350

Data for item nos. 50 and 51

Presented below are the unadjusted balances of selected accounts of Adobo Company as of December
31,2019:
Selected accounts Unadjusted Balances
Selected accounts Debit Credit
Cash P 500,000
Accounts receivable 1,300,000
Allowance for uncollectible 8,000
accounts
Net sales P 6,750,000
Additional information:
v Goods amounting to P 50,000 were invoiced for the accounts of Variety Store & Co., recorded on

1st Semester A.Y. 2019-2020 Intermediate Accounting 1: Midterm Examination 6-NAB

 January 2,2019 with terms of net, 60 days, FOB shipping point. The goods were shipped to Variety
Store on December 30,2019. The bank returned on December 29,2019, a customer’s check for P
15,000 marked “No Sufficient Funds” but no entry was made.
v Harrison estimates that allowance for uncollectible accounts should be one and one-half percent of
the accounts receivable balance as of year-end. No uncollectible accounts expense has yet been
provided for 2019.
50. What is the adjusted balance of Accounts Receivable as of December 31,2019?
A. P1,365,000 B. P1,350,000 C. P1,335,000 D. P1,315,000

51. What amount should be reported as allowance for doubtful accounts on December 31, 2019?
A. P20,475 B. P20,250 C. P20,025 D. P19,725

Data for item nos. 52 and 53

Tonkatsu Company has the following data relating to accounts receivable for the year ended December
31,2019:
Accounts Receivable, January 1 P
325,000
Allowance for Bad debts, January 1 18,400
Sales during the year, all on account, terms: 5/10,3/15, n/30 2,800,000
Cash received from customers during the year 2,260,000
Accounts written off during the year 17,500
Sales returns and allowances 14,280
An analysis of cash received from customers during the year revealed that P 1,140,000 was received from
customers availing the 10-day discount period, P 873,000 was received from customers availing the 15-
day discount period, P12,000 represented recovery of accounts written-off, and the balance was received
from customers paying beyond the discount period. Tonkatsu’s year-end balance of allowance for bad
debts was estimated to be 5% of the outstanding accounts receivable as at December 31, 2019 based on
the aging of the accounts.
52. Accounts receivable balance at December 31, 2019 is
A. P770,220 B. P758,220 C. P746,220 D. P742,620

53. Bad debts expense for the year ended December 31, 2019 is
A. P37,911 B. P37,311 C. P25,011 D. P24,411

54. Dinuguan Company produces herbal tea and other slimming products that are sold throughout the
Philippines. While the company is experiencing steady growth in sales, it has become noticeable that
collections of accounts receivables from customers are no longer fast as they used to be. The accounts
receivable balance at December 31, 2019 is P3,000,000. The condition of this balance in terms of age and
probability of collection is presented below:

Proportion of Probability of
Total Age Categories Collection
64% 1 to 10 days 99%
18% 11 to 30 days 97.50%
8% past due 31 to 60 days 95%
5% past due 61 to 120 days 80%
3% past due 121 to 180 days 65%
2% past due over 180 days 20%
What is the amortized cost of Dinuguan Company’s accounts receivables?
A. P2,995,400 B. P2,846,800 C. P2,736,200 D. P1,675,800

55. On January 1, 2019, Kaldereta Corporation sold a piece of equipment that was acquired ten years ago
for P350,000. At the time of sale, the equipment had an accumulated depreciation of P240,000. Kaldereta
received a non-interest bearing note for P300,000 in exchange for the equipment. The note is due on
December 31, 2020. There is no readily available market value for the equipment, but the current market
rate of interest for comparable notes is 12%. How much is the interest revenue in 2019 and 2020,
respectively? (Use four decimal places for the PV factor)
A. P36,000 and P24,840 C. P28,699 and P32,141
B. P30,420 and P30,420 D. P60,840 and P0

56. On December 31, 2016, an entity sold a piece of land costing P800,000 and received a three-year, 3%,
P1,200,000 note as payment. The interest on the note is payable annually every December 31. The
principal amount of the note is payable on December 31, 2019. The prevailing interest rate for similar
obligation at December 31, 2016 is 10%. Assume that there is no available fair value for the land on the
date of sale. Using the four decimal places to compute the present value factor, which of the following is
part of the possible entries that would appear up to the maturity of the note?

1st Semester A.Y. 2019-2020 Intermediate Accounting 1: Midterm Examination 7-NAB

 A. credit Gain on sale of land, P400,000 C. debit Discount on Notes receivable,
P112,383
B. debit Cash, P1,236,000 D. credit Interest revenue, P76,383

57. On July 1, 2019, Pork Steak Co. sold a machinery with historical cost of P2,000,000 and accumulated
depreciation of P1,100,000 in exchange for a 3-year, P1,200,000 noninterest bearing note receivable due
in equal semiannual payments every June 30 and December 31 starting December 31, 2019. The
prevailing rate of interest is 10%. (Use four decimal places). How much is the impact to the income
statement of the related transaction for 2019?
A. P94,760 B. P115,140 C. P144,236 D. P165,897

58. On January 1, 2019, Beef Steak Co. sold machinery costing P2,000,000 with accumulated depreciation
of P1,100,000 in exchange for a 3-year P1,200,000 noninterest bearing note receivable due as follows:
12/31/2019- P300,000; 12/31/2020- P400,000; 12/31/2021- P200,000; 12/31/2022- P300,000. The
prevailing rate of interest for this type of note is 10%. Using four decimal places for the present value
factor, how much is the current and non-current portion related to the note as of December 31,
2020?
A. P200,000 and P300,000 C. P157,028 and 272,697
B. P500,000 and P0 D. P272,697 and P27,303

59. Bulalo Company reports a loan receivable from Nilaga Company in the amount of P5,500,000. The
initial loan’s repayments include a 10% interest rate plus annual principal payment of P1,100,000 on
January 1 of each year. The loan was made on January 1, 2019. Nilaga made the interest payments for
2019 but did not make the P1,100,000 principal payment nor the P550,000 interest payment in 2020.
Nilaga is having financial difficulty and Magic has concluded that the loan is impaired. Analysis of Nilaga’s
financial condition on December 31, 2020 indicates that the principal and interest currently due can be
collected but it is probable that no further interest can be collected. The probable amounts and timing of
collection are determined as follows:
December 31, 2021 - P1,750,000
December 31, 2022 - 2,000,000
December 31, 2023 - 1,750,000
Total P5,500,000
How much is the carrying value of the loan receivable to be reported for the year ended December
31, 2022?
A. P1,590,785 B. P1,750,000 C. P3,264,350 D. P4,558,500

60. At December 31, 2019, one of Tocino Company’s credit customers, Hotdog Trading, is experiencing
financial difficulties. As a result, Hotdog Trading has missed the payment of the principal amount of its
notes payable of P3,000,000 and accrued interest for the year is P300,000. A restructuring arrangement
was approved by the management of Tocino Company, as follows:
v The principal was reduced to P2,000,000 and will be due on December 31, 2021;
v Accrued interest of P300,000 is condoned;
v Interest rate is reduced to 8% payable on December 31, 2020 and December 31, 2021.
The prevailing market interest rate for similar instrument at the time of restructuring (December 31, 2019) is
12%. What is the impairment loss to be recognized in December 31, 2019? (Use four decimal
places for the PV factor)
A. P1,157,432 B. P1,369,520 C. P1,447,184 D. P0
61. BBQ Company factored P500,000 of accounts receivable to Hamonado Finance Company. Factoring
fee was 10% of the receivables factored. Hamonado withheld 5% of the purchase price as protection
against sales returns. Which of the following will be part of the entry to record the factored accounts
receivable?
A. debit Cash, P500,000 C. credit Accounts receivable, P450,000
B. debit Receivable from factor, P25,000 D. debit Loss on factoring, P50,000

62. In your review of the books of Chicken Company for the year ended December 31, 2019, you noted the
following:
Date Notes Receivable Debit Credit
Sep. 1 Tinola, 20%, due in 3 months P80,000
Oct. 1 Inasal Co., 24%, due in 2 months 300,000
Oct. 1 Discounted Tinola note at 25% P80,000
Nov. 1 Fried, 24%, due in 13 months 600,000
Estofado Co., no interest, due in one
Nov. 30 year 500,000
Nov. 30 Discounted Estofado note at 18% 500,000
How much is the loss on notes receivable discounting should be reported in the 2019 income
statement?

1st Semester A.Y. 2019-2020 Intermediate Accounting 1: Midterm Examination 8-NAB

 A. P0 B. P90,000 C. P90,500 D. P90,833

Data for item nos. 63 to 65

During the year 2019, the management of Lechon Kawali Company is looking into possible alternatives of
obtaining additional financing. After considering several options, Lechon Kawali decided to use its
receivables as a means of obtaining cash to continue operations.
On July 16, 2019, Lechon Kawali factored P1,200,000 of its accounts receivable to Catsup Finance
Company. Factoring fee was 15% of the receivables purchased and the finance company withheld 10%
of the purchase price as protection against sales returns and allowances.
On November 30, 2019, accounts receivable amounting to P600,000 were assigned to Mang
Tomas Bank as collateral. The bank advanced 75% of the assigned accounts less finance charge of 5%
based on the amount advanced. During December, Lechon Kawali collected P200,000 which was
remitted to the bank on December 31. This amount was applied first to payment of interest at the rate of
1% per month based on the outstanding balance and the remainder of the collection was applied to the
principal.
A customer’s 10%, 120-day note for P300,000 dated September 20, 2019 was discounted with
Banco Toyomansi on November 4, 2019. The bank uses a discount rate of 12% and a 360-day year.
Additional information is as follows:
Allowance for Uncollectible Accounts, December 31, 2019 (before adjustment) -
P32,000 Accounts Receivable (not including factored and assigned accounts), December 31,
2019 - 500,000
Estimated uncollectibles, December 31, 2019 (based on accounts receivable balance) -
5%
63. How much is the equity of Lechon Kawali Company in assigned accounts at December 31, 2019,
after its remittance to the bank?
A. P145,500 B. P150,000 C. P195,500 D. P254,500

64. How much is the uncollectible accounts expense for the year 2016?
A. P55,000 B. P45,000 C. P23,000 D. P13,000

65. How much was the net proceeds from the discounting of notes?
A. P302,250 B. P302,500 C. P305,350 D. P310,000

---END OF THE EXAMINATION---

God bless! J

Remember Proverbs 3:5-6 “Trust in the Lord with all your heart, and do not lean on your own
understanding. In all your ways acknowledge him, and he will make straight your paths.” Be
expectant of what God
prepared for you. The journey to success is never easy but it is all worth it!

Concentrate === Pray === Achieve

/NABergonia2019

1st Semester A.Y. 2019-2020 Intermediate Accounting 1: Midterm Examination 9-NAB